traditional markets: How gold jewellery hubs are losing their traditional lustre
Zaveri Bazaar is not glittering. Its dilapidated buildings and narrow, congested lanes look forlorn, bereft of bustle. Very rarely do you see large families — stoic men leading groups of happy women — flocking jewellery shops to buy gold for an impending wedding.
This year has been particularly bad for many jewellers in the area. Arguably the most valuable gold hub in India, home to over 5,000 jewellery shops, the 150-year-old Zaveri Bazaar has seen a mammoth fall in sales this marriage season, say oldtimers and traditional jewellers. It’s not alone; it’s a national trend.
Others traditional jewellery hubs — Thrissur and Kozhikode markets in Kerala, Bow Bazar and Bagree Market in Kolkata, Johari Bazaar in Jaipur and Sadar Bazaar and Hauz Khas in Delhi — are all marking decline in sales over the past few years. This is despite India continuing to import record bullion.
“Close to 35,000 marriages took place across 5-6 muhurats in November and December. Despite so many marriages, we did not see a significant spike in gold demand,” rues Kumar Jain, vice-president, Mumbai Jewellers Association. This wedding season has close to 85 muhurats or auspicious marriage hours, jewellers clarify.
Between September and June, jewellers in leading micro-markets hold 70-90 tonnes of gold stock. This year, these traditional jewellers have trimmed holdings considerably, in the backdrop of slackening demand for “new gold” (industry parlance for fresh cash purchases and not exchange of old gold). Zaveri Bazaar does about `170 crore worth of daily sales currently, as against Rs 225-250 crore worth of wedding season sales in previous years.
Jain, whose family owns Umedmal Tilokchand Zaveri, one of the oldest shops in the bazaar, feels their patrons are “scared” to purchase new gold using banked funds, lest they come under the prying eyes of income tax officials.
“People are not buying fresh jewellery anymore. They’re only exchanging old gold or selling gold coins (investment gold) to acquire new jewellery,” he adds.
A few also blame higher prices for sluggish demand. Gold prices were trending at `29,500-levels (per 10 gm) in Mumbai market last week.
On the other hand, gold import data paints a shiny picture. As per global consulting firm Metals Focus, India imported 846 tonnes of gold in 11 months of 2017 — 39% more than all of 2016. During January-September, Indians consumed 350 tonnes for jewellery and 105 tonnes for investment needs.
“There is a shift in demand from unorganised to organised jewellers. This is visible in the strong results posted over the years by listed players,” says Chirag Sheth, a research consultant at Metals Focus. “Gold shopping is no longer just buying a product. It is all about the experience that goes with it.
Jewellers who can provide good quality products, along with a great buying experience would outperform peers.” Anecdotal evidence suggests that organised jewellery retail — with assurances of quality and convenience — is indeed eating into the business of traditional one-shop family jewellers. Till about a few years ago, more than 70% of jewellery sales in India were through unorganised regional players — many housed in traditional markets such as Zaveri Bazaar.
SHIFT IN PREFERENCE
Gold import and consumption data suggests traditional one-shop jewellers are fighting a losing battle. According to some industry-watchers, the shift (in buying preference) to organised players gathered pace after demonetisation last year. Unorganised jewellery shop owners are notorious for dubious sale methods. A good number are presumed to sell low quality (or smuggled) gold, issue fake bills and dodge taxes. Cautious buyers prefer to buy gold with proper bills.
“Buyers with clean money would not want to associate with small, unorganised players anymore,” says Surendra Mehta, national secretary, India Bullion and Jewellers Association. “They are moving to organised retailers now as small, one-shop jewellers are not even able to provide payment options such as digital pay-ins, RTGS or cheques.” Informed buyers insist on ‘hallmark’ — a gold purity certification in accordance with Indian Standards specifications.
“Once the government imposes mandatory hallmarking of gold, over two lakh jewellers would be eradicated from the industry,” predicts Mehta. Today, consumers are also swayed by modern designs and light-weight options offered by organised retailers.
Earlier, established retailers only sold pieces above a certain weight — making it unaffordable to a large section of buyers. “Branded retailers keep jewellery at all possible price points these days. You may get to buy gold jewellery for even Rs 2,000 now,” says Balram Garg, managing director, PC Jeweller. “Widening customer base is helping organised jewellery sector to grow 20-25% every quarter.” Even the stock market has taken notice the robust growth numbers posted by most listed jewellers.
Shares of PC Jeweller, Titan and Tribhovandas Bhimji Zaveri (TBZ) are hovering at all-time highs. GST, along with regulations such as levy of 1% excise duty on gold jewellery and requirement of PAN for jewellery purchase over Rs 2lakh would help organised gold retailers to wean away business from unorganised players, equity analysts feel.
“Organised players are taking away business from smaller players now,” says Joy Alukkas, chairman of the leading eponymous chain from Kerala. “Better pricing, guarantee (for every purchase), third party purity certification and services such as free repair and appropriate buyback options swing business in favour of organised players.” The company has been logging 5-8% growth in sales across their 140 showrooms over the past year.
Another giant, TBZ, has embarked on an expansion spree to reach out to more customers. The chain now has over 37 stores across India. “Even in smaller cities, buyers are shifting from one-shop jewellers to organised retail chains,” says Binaisha Zaveri, a director at TBZ.
“People come to organised players because they offer newer designs; our sale, buyback and exchange procedures are far more simple and transparent than smaller players.” That said, retail jewellery chain owners do not expect fair winds to continue for a long time. Industry veterans are aware of the changing tastes of their customers. At best, they give themselves one or two decades of great times ahead.
“Young people are not very keen to accumulate gold anymore… In another 20 – 30 years, people may stop buy gold altogether. We’re aware of such possibilities,” Alukkas claims. In comparison, traditional oneshop owners remain oblivious to such paradigm changes happening all around them, instead prefer to call the current slump a “bad year.”
“The shift to organised retail jewellers is only happening at a miniscule level. We still have our traditional clients with us,” counters Anil Jain, owner of R Pukhraj & Co, a jeweller at Zaveri Bazaar. “After all, we can give better price options to customers… Organised retail chains have a lot of mark-up cost. All their marketing cost is added to the product sold. We don’t do that.”
Jewellers in traditional markets expect buyers to return once gold prices decline. But a deep price correction may not happen anytime soon. Option data from CME Group, the world’s busiest derivatives marketplace, plots stiff resistance for gold at $1300 per ounce and strong support at 1250-levels. Analysts expect international gold prices to move in a narrow $50 band in the near term.
“People buy gold for three reasons – for jewellery, as a safe haven against inflation and as an investment avenue. Investment demand is hit badly, as equities market is delivering better returns than gold currently,” analyses T Gnanasekar, director of CommTrendz Research.
Traditional jewellers may have to start selling purity-certified gold, with proper bills and buyback assurances to hold customers. They may have to make jewellery shopping more experiential. Slick pleasantries, wafer-thin sandwiches and juice may not be enough. Instead, plush showrooms with deep-set sofas, newer designs, professional service and adequate parking space may bring back customers.
(With inputs from Ram Sahgal)